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for the initial option payment is set forth in the Initial Option Payment Calculation attached hereto as
Appendix 1, which is based in turn upon the Bureau of Reclamation's letter of March 10, 2004
attached hereto as Appendix 2.
2.2.2.2 If, at any time during the option term, the estimated reimbursable
construction costs for the ALPD Depletion Allocation or the estimated Specific Costs attributable to
the portion of the ALPD Depletion Allocation optioned herein (including both General Items of
Specific Costs or Special Items of Specific Costs) increase based upon a construction cost increase
for the Animas -La Plata Project that exceeds the $163,000,000 increase that occurred in 2003, then
in order to maintain the option herein, Purchaser shall, within 45 days of receipt of written notice
from the Authority setting forth the cost increase, remit an additional option payment, which shall be
the greater of: 5% of the estimated construction cost increase attributable to the portion ofthe ALPD
Depletion Allocation optioned herein, which shall be determined by multiplying the total
construction cost increase for the ALPD Depletion Allocation (including increases in Joint Project
Costs and General Items of Specific Costs) by 1,900 and dividing the result by 2,600, or 100% of the
estimated cost increase for Special Items of Specific Costs attributable to the portion of the ALPD
Depletion Allocation optioned herein.
2.2.2.3 If the Purchaser fails to remit the additional option payment when
due, then the option shall terminate, the Authority shall retain the full amount of the option payment
made hereunder, and this Agreement shall be terminated and of no further force and effect.
2.2.3 Option Term. The term of this option shall extend to 30 days after the
determination of the Additional Repayment Obligation due for the ALPD Depletion Allocation in
accordance with paragraph 8(b)(1) of the Funding Agreement.
2.2.4 Option Exercise. No later than the expiration of the option term, Purchaser
shall, if it wishes to exercise the Option granted herein, provide written notice to the Authority of
exercise of the Option. Such notice shall specify whether Purchaser is exercising its option to
purchase the full amount of the ALPD Depletion Allocation optioned herein, or whether
alternatively, Purchaser wishes, in accordance with the provisions of Paragraph 2.3.2 below, to
relinquish the option for, and elect not to purchase, that portion of the ALPD Depletion Allocation
optioned herein assigned to the Additional Water Charge.
2.2.4.1 In the absence of the exercise of the Option prior to the expiration of
the option term, the Option shall terminate, the Authority shall retain the full amount of the initial
option payment and any additional option payment made hereunder, and this Agreement shall be
terminated and of no further force and effect.
2.2.4.2 Upon exercise of the Option, the further terms of this Agreement
shall govern the acquisition by Purchaser of the right to receive the portion of the ALPD Depletion
Allocation optioned herein.